Delhi HC Allows the Taxpayer to Operate Bank Frozen by the GST Department in Matter of Rs. 15 Cr GST Evasion

The Petitioner is a manufacturer and trader of steel products such as TMT bars, billets, scrap, etc., registered under GST No. 05AACCB5197N1ZA. Following a search and seizure operation by the DGGI on 13th December 2023, a provisional attachment of the Petitioner’s bank account (IndusInd Bank Account No. 201002965063) was made via Form GST DRC-22 dated 18th December 2023. The basis for the attachment was the alleged GST evasion of Rs. 15.09 crores due to unaccounted excess stock found during inspection.

Issues Framed

• Whether the provisional attachment of the Petitioner’s bank account is justified in the absence of an SCN and formal proceedings under the CGST Act, 2017?
• Whether any relief can be granted for operation of the bank account pending adjudication?

Petitioner argued that the DGGI’s estimation is vague and arbitrary. The estimation of GST Evasion was based purely on visual observation without quantifiable evidence. No GST Proceedings u/s 67 have been initiated or Show Cause Notice (SCN) has been issued till date, even after over a year. They have paid over Rs. 116 crores as GST and Rs. 4.06 crores as income tax in the last three years. Their business is under severe financial stress due to Bank Account Attachment.

Futher the Petitioner’s directors have a combined net worth of over Rs. 50 crores. The Petitioner has always complied with tax obligations and employs 150 workers.

The revenue on other hand contended that the Provisional attachment was necessitated to secure revenue interests following evasion findings.

Court’s Decision & Rationale

• The Court found that although an investigation was initiated, no SCN or formal adjudication had taken place for over 16 months.
• The provisional attachment under Section 83 CGST Act must not lead to excessive hardship or virtual shutdown of business.
• A balance must be struck between protecting revenue interests and ensuring continuity of legitimate business operations.

Taking note of Petitioner’s substantial tax compliance history, it’s ongoing business operations and net worth of the promoters, the Court allowed Petitioner to operate freezed Bank Account suject to maintaining a minimum balance of Rs. 1.5 crores.